How to Save Money

Saving money is the foundation for a trip around the world, but also for life.  Most people’s dreams involve money: starting a business, moving to France, retiring.  Luckily for all of us, saving money is a skill that can be learned.  Once you learn how to save money and make it a habit,  you wouldn’t want to not save money.  Best yet, saving money is something everyone can do.

While everyone can save money, the volume at which you save will be determined by two factors: Income and Spending.  Income is the largest single factor is determining how much you can save because if you cut costs too far you would starve to death.  Your rate of savings will be determined by your income; there are no two ways about it.  If your time horizon for saving is long, the time-value of money will help you, even if you have a meager income.

What can you do to increase your income?

  1. Post High School Education. This is the single largest percentage income increaser.  There are costs, but it’s an investment in your future and self.  College isn’t the only option, learning trades or getting certifications leads to increased income and career stability as well.
  2. Switching employers. If you have been with the same employer for several years, you have probably fallen behind market compensation for your position.  Look around at other companies; you might be surprised to find out what you’re worth to another company.
  3. Innovating. Creating something new, at work or on your own will increase your value.  The more valuable your work, insights and solutions are, the better you will get paid.
  4. Secondary sources of income. Put your skills or cash to work for you.  Have something you can teach that people are willing to pay for?  Consider doing it on the side.  Have cash sitting around?  Make that cash create more cash through investments such as rental properties or buying a business.

Do whatever you can to increase your income while not falling prey to get rich quick schemes.  The more income you have, the more you will be able to save.  There is a base cost to life, and while controlling your spending is important, the more you make beyond paying for life necessities, the more money that is available for you to save.


The other side of the savings equation is controlling your spending.  For this, there is nothing more than setting a goal and controlling your spending.  The most important step is setting your savings goal and deciding that you will build your life around accomplishing that goal.  Set an amount and a time that you want it by, then break it into monthly and weekly amounts.  Focus on the weekly and monthly savings and you will steadily approach your savings goal.  Here are the steps we used to save for our trip around the world.


Set a monthly savings goal.  It could be a dollar amount or percentage of income that allows you to reach your longer-term goal.  Then direct deposit that amount from your paycheck into a savings account.  The remainder of your paycheck should be deposited into a separate checking account.  Your checking account is your spending money, you need to adjust your life so that you can live off what is in your checking account, nothing more.

This method makes saving unconscious, but spending a conscious act.  If you need more than is in your checking account you will have to actively take away from making your dreams come true as any withdrawal from savings is a step back from accomplishing your savings goal.

HOW WE DID IT: 100% of thinkCHUA’s income went directly to a savings account.  The only money we could spend on anything was LOCAVORista’s income.  It was as though my income didn’t exist, we never saw it, never touched it.  We built our life and spending habits around LOCAVORista’s income, nothing more.  LOCAVORista’s income was the lower of our two incomes, we decided, when we got married, that we would always try to live off the lesser income and save the other.

When setting your savings goal, ease into it.  As you see your savings increase and you get the hang of controlling your spending, you can accelerate your savings.  The problem with setting your sights to high at the start is that you may consistently miss your target and lose faith in your ability to save.


To cut costs, you need to understand what those costs are. This can be simple and free with a account.   Use this service to monitor your spending and set budgets for different areas of your life.  Keep budgets simple, the simpler, the easier it will be for you to manage your life to.

MONEY MANAGEMENT TIP: The first step to really tracking your spending is eliminating cash from your life.  Seriously, cash is hard to track, think back, what have you spent cash on in the past month?  If you had spent this on a credit card you would have a record of all your spending.  I recommend a credit card because they give you better rewards than debit card, but PAY YOUR BALANCE IN FULL EVERY MONTH.  Carrying a credit card balance means that your spending exceeds your income and you need to adjust your spending.

Without understanding what you are spending money on, it is virtually impossible to cut costs in your life or achieve your savings goal.


Fixed costs are what you have to pay each month, no matter what.  These are housing/rent payments, car payments, cable TV, student loans, etc.  Rent and mortgage payments are just a transfer of your money to someone else.  People make the claim that mortgage payments help them build equity, but if house prices are not increasing, each payment is loaded with interest payment to the bank until the latter years (10+ years in) of a mortgage.

HOW WE DID IT: LOCAVORista and I set out what seemed to be a too-low-to-be-true budget for housing, defined a neighborhood and didn’t budge.  It took a lot of work to find a place, but by sticking to our guns we found a perfect place for us, below the going rate.  Additionally we never subscribed to cable TV and used the cheapest Internet package we could find.

Unless you spend lavishly shopping or drinking, cutting your fixed costs is probably a huge step towards increasing savings.  If you pay $1400/month in housing costs and can get that down to $1000/month, you can instantly bank that $400 each month.  Maybe this means living with a roommate, or walking a little further to the bus, but a $4800 annual savings equates to a $6000 pre-tax raise you gave yourself.


Cutting fixed costs are great, because it is relatively painless once it has been done.  Fixed cost cutting is the gift that keeps giving.  The other spending, discretionary, is much more painful, these are our daily expenses.  There are thousands of websites and authors explaining how to do this better than I could, so here are some recommended reads to educate yourself.  Education is always more powerful than top-10 lists of tips.

MSN: Best Financial Advice Ever

CNN: Help Desk

Motley Fool: Personal Finance Section

Motley Fool: How to Budget

Get Rich Slowly

HOW WE DID IT: We set our budgets on and used credit cards for all purchases so that we could track spending.  Some months we exceeded budgets in certain categories (damn Decembers), but we made sure we controlled other costs to stay within the larger budget, therefore we didn’t touch savings until we were on our trip.

Saving money is about self-control.  Knowing thyself is the first commandment, if you know that going to a certain store, getting drunk with certain people, or feeling a certain way causes you to spend foolishly, you need to avoid those triggers.  My father always says, “when shopping, money is either going to be in your pocket, or someone else’s.”  Keep the money in your pocket.


  1. Cook at home
  2. Make coffee at home
  3. Live off one income (if you have two)
  4. Cut cable-tv
  5. Cut memberships you don’t use (i.e. gym)
  6. Find happiness in life and people, not material possessions
  7. Drink at happy hours only


Building savings is fairly easy in principle, but can be hard in practice.  There are a lot of things going on and you may miss out on some things to save money.  This is why it is important to be fully committed to making your dream come true, because each dollar spent elsewhere is a dollar not available to be spent pursuing your dream.

Saving money is a skill can be a slow and tedious process, but learning it will permanently make your life better.  In the end, saving money is about short-term pain for long-term gain.  If you want something enough, you need to remind yourself of your goal each time you think about spending money.


NEXT: Worldly Possessions: What to sell and keep while you travel ->


The Living IF round-the-world travel Planning and Preparation section:

  1. Planning and Preparation Overview
  2. Saving Money: How we did it and how you can too!
  3. Worldly Possessions: What to sell and keep while you travel
  4. Cost and Budgeting: How much will do you need to save?
  5. Logistics: Health, insurance and the nitty gritty
  6. Packing Tips: What and why to pack it



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